RBI Holds Repo Rate at 5.25% Amid Rising Inflation Risks and Global Uncertainty
- The Reserve Bank of India’s Monetary Policy Committee (MPC) unanimously decided to keep the repo rate unchanged at 5.25% during its June 3–5, 2026 meeting, while maintaining a neutral policy stance. The Standing Deposit Facility (SDF), the Marginal Standing Facility (MSF) and Bank Rate were also held constantly at the level observed at April MPC meet.
| RBI June Policy Decision | Policy Repo Rate | SDF (Standing Facility Rate) | MSF (Marginal Standing Facility) | Bank Rate |
| Previous Rate | 5.25% | 5.00% | 5.50% | 5.50% |
| New Rate | 5.25% | 5.00% | 5.50% | 5.50% |
| New Change | Neutral | Neutral | Neutral | Neutral |
- The decision reflects growing uncertainty stemming from prolonged geopolitical tensions in West Asia, rising energy prices, supply chain disruptions, and weather-related risks.
- The RBI noted that domestic economic activity has remained relatively stable despite external challenges, supported by steady private consumption, ongoing investment activity, strong services exports, and capital expenditure. However, elevated commodity prices, higher import costs, potential supply disruptions, and a forecast of a deficient southwest monsoon are expected to weigh on growth prospects going forward.
- Considering these factors, On the Growth side, RBI projected India’s real GDP growth at 6.6% for FY2026-27, while warning that prolonged global disruptions, financial market volatility, and adverse weather conditions remain key downside risks.
- On inflation front, headline CPI rose to 3.48% in April 2026, but the RBI expects price pressures to strengthen in the coming quarters due to higher fuel prices, rising input costs, and possible second-round effects on wages and inflation expectations. Consequently, CPI inflation is projected at 5.1% for FY2026-27, with inflation expected to approach the upper end of the RBI’s tolerance band during the third quarter.
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RBI Economic Projections — Jun’26 Policy Meet |
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FY27 |
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| Q1 | Q2 | Q3 | Q4 | Full Year | |
| Growth Projection | 6.6% | 6.3% | 6.5% | 6.8% | 6.6% |
| Apr’26 projections | 6.8% | 6.7% | 7.0% | 7.2% | 6.9% |
| Change from Apr’26 | -0.2% | -0.4% | -0.5% | -0.4% | -0.3% |
| CPI projections | 4.2% | 5.1% | 5.9% | 5.4% | 5.1% |
| Apr’26 projections | 4.0% | 4.4% | 5.2% | 4.7% | 4.6% |
| Change from Apr’26 | 0.2% | 0.7% | 0.7% | 0.7% | 0.5% |
| Source- RBI April and June Projection | |||||
- In addition to it, RBI has opted to support the Indian Rupee by attracting foreign currency inflows. As part of this effort, the central bank announced a series of measures, including relaxation of regulations governing FCNR(B) and NRE deposits to encourage greater participation from Non-Resident Indians, easing overseas borrowing norms for banks and corporates, and providing incentives aimed at attracting foreign investment into Indian debt markets.
In conclusion, while these measures are supportive for the currency in the near term, their effectiveness will largely depend on external factors such as crude oil prices, geopolitical developments in the Middle East, and the direction of foreign capital flows. With FII outflows remaining elevated and energy market risks persisting, the Rupee could continue to face depreciation pressures despite the RBI’s efforts to bolster dollar inflows.
- The next meeting of the MPC is scheduled for August 3 to 5, 2026.
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